Question 1

If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then $16,000 is termed the:

Accepted Answer

$16,000 is the differential cost, which is the difference in cost between the two alternatives. This is important information for making a decision between the two alternatives.

Question 2

Indirect costs:

Accepted Answer

Indirect costs cannot be traced to a particular cost object.

Question 3

Play Time is a nursery school for pre-kindergarten children.The school has determined that the following biweekly revenues and costs occur at different levels of enrollment:  The average cost per student when 16 students enroll in the school is:

Accepted Answer

The answer of Play Time is a nursery school for...

Question 4

Which of the following would not be characterized as a cost object?

Accepted Answer

All the options listed are examples of cost objects because they are entities for which costs are measured and assigned.

Question 5

Your brother is trying to sell his bicycle for $200.He refuses to lose more than $50 on the sale because it originally cost him $229 when he purchased it two years ago.Which of the following would be his sunk cost?

Accepted Answer

The sunk cost in this scenario is the original cost of the bike, which was $229. Sunk cost refers to the cost that has already been incurred and cannot be recovered. It is not relevant in making present or future decisions, such as setting a selling price for the bicycle. Therefore, choice C is the correct answer, while choices A, B, D, and E are incorrect.

Question 6

Which one of the following costs would not be considered an indirect cost of serving a customer at a fast food restaurant?

Accepted Answer

The cost of the hamburger patty in the burger the customer orders is a direct cost because it is directly related to the production of the product being sold. Indirect costs are not directly related to the production of the product or service, but are necessary for the business to operate overall. Therefore, B, C, D, and E are all indirect costs.

Question 7

How would a 5% sales commission paid to sales personnel be classiﬁed in a manufacturing company?

Accepted Answer

A sales commission is a variable cost because the amount paid changes with the level of sales. It is also a period cost, as it is incurred during the period in which sales are made, rather than being directly tied to the production of a specific product. Therefore, the 5% sales commission paid to sales personnel would be classified as a variable, period cost.

Question 8

Play Time is a nursery school for pre-kindergarten children.The school has determined that the following biweekly revenues and costs occur at different levels of enrollment:  The marginal cost when the twenty-ﬁrst student enrolls in the school is:

Accepted Answer

The answer of Play Time is a nursery school for...

Question 9

The salary that is sacriﬁced by a college student who pursues a degree full time is a(n):

Accepted Answer

The salary a college student gives up by pursuing a degree full time is a perfect example of an opportunity cost. Opportunity cost is the cost of the next best alternative foregone, which, in this case, would be the salary the student could have earned if they had chosen to work full time instead of pursuing a degree.

Question 10

Which of the following costs should be ignored when choosing among alternatives?

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered regardless of which alternative is chosen. Therefore, they should be ignored when choosing among alternatives. The other costs listed are relevant and should be considered when making decisions.

Question 11

When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000.What are the total costs when 8,000 units are produced?

Accepted Answer

Variable costs for 8,000 units are 8,000 * $35 = $280,000. Fixed costs are $200,000 - (5,000 * $35) = $25,000. Total costs for 8,000 units are $280,000 + $25,000 = $305,000.

Question 12

Gisano's Pizza operates a restaurant that serves double-decker pizzas.The table below shows the cost incurred during a month when 900 pizzas were served.  Required: Fill in the missing amounts, labeled A through O, in the table above.

Accepted Answer

The answer of Gisano's Pizza operates a restaurant that serves...

Question 13

Which of the following would not be considered a direct cost with respect to the service department of a new car dealership?

Accepted Answer

Property taxes are not directly related to the operations of the service department. They are a fixed cost incurred by the dealership as a whole, and are therefore considered indirect costs rather than direct costs of the service department.

Question 14

Costs that can be easily traced to a speciﬁc department are called:

Accepted Answer

Direct costs can be easily traced to a specific department or product, whereas indirect costs cannot. Product costs and manufacturing costs are broader categories that can include both direct and indirect costs, and processing costs are a specific type of cost that relates to the production process. Therefore, the best choice is direct costs.

Question 15

Manufacturers have established a cost classiﬁcation called product costs.Deﬁne the term "product cost" and note where these costs appear in the ﬁnancial statements.Be speciﬁc.

Accepted Answer

The answer of Manufacturers have established a cost classiﬁcation called...

Question 16

The sum of costs necessary to effect a one-unit increase in the activity level is a(n):

Accepted Answer

The sum of costs necessary to effect a one-unit increase in activity level is known as the marginal cost. Marginal cost represents the change in total cost that arises when the quantity produced changes by one unit. It helps managers to make informed decisions about whether to increase or decrease production, by comparing the marginal cost with revenue generated by selling the additional unit.

Question 17

Which two terms below best describe the wages paid to security guards that monitor a factory 24 hours a day?

Accepted Answer

The wages for security guards are considered a fixed cost because they do not vary with production levels, and an indirect cost because they are not directly tied to the production of goods.

Question 18

The tuition that will be paid next semester by a college student who pursues a degree is a(n):

Accepted Answer

Out-of-pocket cost refers to the expenses that must be paid in order to pursue a degree, including tuition, books, and supplies. Sunk cost refers to costs that have already been incurred and cannot be recovered, indirect cost is a cost that is not directly related to the pursuit of a degree, average cost refers to the total cost divided by the number of units produced or services provided, and marginal cost refers to the additional cost of producing one more unit or providing one more service.

Question 19

Travon and Tony (T & T) Enterprises has a single facility that it uses for manufacturing, sales, and administrative activities.Should the company's building depreciation charge be expensed in its entirety or is a different accounting procedure appropriate? Explain.

Accepted Answer

The answer of Travon and Tony (T & T) Enterprises...

Question 20

You have been asked to work an extra day and will receive $150.However, you already bought a discounted ticket to a theme park for $37 and ﬁgure that you will spend an additional $50 at the park. What is the sunk cost if you decide to work?

Accepted Answer

The sunk cost is the $37 spent on the non-refundable ticket, as it cannot be recovered regardless of the decision to work or go to the park.

Quiz 2: Basic Cost Management Concepts